Engro Corp revenues show robust growth of 35% in 2023

In 2023, Engro Corporation’s consolidated revenue increased by 35% to Rs482 billion.

The consolidated Profit After Tax (PAT) before accounting for the impact due to the remeasurement of thermal energy assets rose to Rs66 billion, up from Rs46 billion in the previous year, resulting in Earnings Per Share (EPS) of Rs63.01.

This significant variance can be attributed to higher urea sales, efficient plant operations, increased earnings from dollar-denominated businesses, and cost optimization efforts.

However, after accounting for the impact of the remeasurement of thermal energy assets, the consolidated PAT stood at Rs36 billion, with an EPS of Rs38.60 in 2023.

Engro Corporation announced a final cash dividend of Rs2 per share for the year. This is in addition to the Rs46 per share dividend announced during the year, bringing the total payout to Rs48 per share.

Regarding the disclosures made at the Pakistan Stock Exchange (PSX) about the ongoing discussions with Liberty Mills Limited and other parties, the Company is evaluating the proposed divestment of its thermal energy assets.

These assets include shareholdings in Engro Powergen Qadirpur Limited, Engro Powergen Thar (Pvt.) Limited, and Sindh Engro Coal Mining Company Limited through Engro Energy Limited via a share sale process.

The Securities and Exchange Commission of Pakistan (SECP), via SRO 986 (I)/2019 dated September 2, 2019, has granted specific exemptions to Independent Power Producers (IPPs) from the applicability of IFRS 9, IFRS 16, and IAS 21.

As a result, the debt component recovered from CPPA-G as part of the tariff approved by NEPRA is recorded as revenue in the profit or loss statement over the life of the loan, while the corresponding depreciation expense for the IPP is recorded over the term of the Power Purchase Agreement (PPA).

Since the term of the loan is shorter than the term of the PPA, this results in higher Net Assets in the Consolidated Financial Statements of the Group.

In compliance with IAS 36, the Company assessed the recoverable amount of the thermal energy assets for both Standalone and Consolidated Financial Statements.

Due to the specific accounting treatment for IPPs, as mentioned above, the Net Assets of the thermal energy assets in the Consolidated Financial Statements are higher than their recoverable amounts.

Consequently, an accounting impact of PKR 30 billion (Owner’s Share: Rs13 billion) has been recognized in the Consolidated Financial Statements for the year ended December 31, 2023.

For the Standalone Financial Statements of the Company for the same period, no impact was recognized as the recoverable amount of the thermal energy assets is significantly higher than their carrying amount.

The Fertilizer business reached a historic milestone with the highest ever urea sales of 2,327 KT, thanks to record urea production, cost optimization, and long-term reliability projects executed during 2022.

The business facilitated import substitution worth USD 0.8 billion in 2023. Despite macro-economic challenges, Engro Polymer and Chemicals Limited maintained an 89 percent market share by ensuring product availability and implementing various incentives to boost market confidence.

The business recorded domestic sales of 199 KT, thereby enabling import substitution of USD 91 million.

To mitigate lower domestic demand, the business focused on export opportunities, achieving record export volumes of 44 KT, including caustic soda exports of 22 KT, generating USD 26 million in foreign exchange for the period.

Engro Enfrashare (Pvt.) Limited continued to expand its national tower footprint, reaching 3,952 tower sites with a 1.21x tenancy ratio in 2023, compared to 3,329 tower sites with a 1.17x tenancy ratio in 2022, serving all four major Mobile Network Operators (MNOs) in Pakistan.

In the Energy vertical, the Mining business is committed to initiating Phase III of the expansion to increase capacity to 11.4 MTPA. Engro Powergen Thar (Pvt.) Limited achieved 82% availability during the year, while the Qadirpur Power Plant maintained 100% availability, ensuring efficient plant operations and dispatching a Net Electrical Output of 870 GWh to the national grid.

Engro Elengy Terminal (Pvt.) Limited handled 73 vessels during 2023, delivering 215 billion cubic feet (bcf) of re-gasified LNG into the SSGC network, with an availability factor of 97.1%.

The Terminal contributed between 13% and 15% to Pakistan’s total gas supply during the year.

However, Engro Vopak Terminal’s chemical throughput was negatively affected by disruptions in the operations of key customers, though a notable 64% increase in LPG marine imports was recorded compared to the previous year.

FrieslandCampina Engro Pakistan Limited continued its growth momentum, achieving a record-breaking topline of PKR 100 billion, a remarkable 36% increase compared to the previous year.

Engro Eximp FZE, the Company’s international trading arm based in the UAE, achieved a turnover of approximately USD 400 million, including third-party contracts, since commencing commercial activity in 2022.